Introduction
AAR Corp is a private company headquartered in Wood Dale, Illinois, that operates in the aviation Aerospace and Defense industry. The American provider is known for comprehensive aftermarket aviation services for both government and commercial customers worldwide. They offer Maintenance, Repair, and Overhaul (MRO) services, supply of parts, integrated solutions, and mobility systems. The firm currently works with customers in over 100 countries and employs more than 6000 professionals (AAR, n.d.). Many of their solutions won different industry awards helping their clients reduce costs and increase operational efficiency. For instance, the independent provider won the 2019 Top Shop Award for Best Wheels and Brake Repair and Best Landing Gear Repair, being selected best by hundreds of suppliers and airlines all over the world (AAR, 2019a). It indicates that the corporation provides high-quality services and is highly valued by its customers.
Core Business, Mission, and Vision
According to the annual report (AAR, 2021), the company’s revenue reached 2,072B in 2020 despite the adverse impact of COVID-19 on the aviation industry and high expenses on lobbying. AAR Aviation allegedly had to put effort and investment to ingratiate with the Trump administration. As a result, it received additional federal contracts worth 1,35B (Confessore et al., 2020). AAR’s mission is to design and deliver the best operational, technical, and financial solutions for their government and commercial aviation customers in order to improve their efficiency and competitiveness (AAR, n. d.). The company’s vision is stated in its long-term purpose what is also known as “Do It Right” policy. In general, it is about the continuous development of solutions and services, a constant search for better options, making customers, partners, employees, and society happy, encouraging their return next time. “Doing It Right” is a direction accompanied by the belief that the company does everything possible to achieve its long-term goals and connect the world. They want to be sure their customers can carry people and cargo safely to the needed destinations.
AAR’s Culture and Core Values
Eight core values of AAR set and develop its internal culture. Safety and quality are critical since millions of people fly on aircrafts every year. “Find a Way. Every Day” concerns AAR’s international presence and their aim to cater solutions suitable to every environment. The company believes in working as one and being inclusive, finding ways to align its employees and give back to the community. “Think New. Think Ahead” drives AAR to embrace and welcome changes within the industry to stay one step ahead of its competitors (AAR, 2019b, 1:45). The company encourages its departments and staff to improve teamwork by achieving goals, making money, and celebrating together. AAR sets and follows multiple quality tests to do its job both fast and well. “Be honest. Inspire trust” is about working with integrity maintaining the trust the company gained from the government and its commercial customers. “Own It” is the last value that promotes the company’s image as a home for employees who incorporate its “Do It Right” policy in their lives.
System of Motivation and Rewards
Apart from friendly culture, AAR Corporation has a comprehensive reward system that motivates its staff. Compensation includes not only salary but also benefit packages that may be different depending on location and position. According to the website, the package can consist of vision, dental, medical, life insurance, disability insurance, accidental death, and dismemberment insurance. It also includes a 401(k) Plan, Paid Time Off (PTO), and company-paid holidays. Online Total Rewards Statement shows employees their total personalized benefits, including company and wellness discounts, tuition reimbursement, training and development, adoption benefits, retirement contributions, and others (AAR, n. d.). Learning Management System was created to provide workers with learning opportunities through tuition reimbursement, on-the-job training, and outside education.
Internal and External Stakeholders
Internal stakeholders include those who directly relate to the corporation manifested in investment, ownership, and employment. In terms of shareholders, eight investment companies currently hold more than 74% of the company’s total shares. The Vanguard Group, Inc., Dimensional Fund Advisors LP, and AllianceBernstein LP own most of them (“ARR Corp: Shareholders,” 2021). As it was mentioned before, AAR provides working places to more than 6000 people worldwide. Interestingly, 24% of its US workforce is veterans, making former armed force members essential stakeholders (AAR, n. d.). The most important external stakeholders are global commercial carriers, government and defense organizations, aircraft manufacturers, and the community. All of them expect high-quality services, solutions, and transparency in the relationship. What is more, AAR wants to see more talented youth choosing to pursue high education in aviation technology and engineering. Since the company supports inclusion and diversity, working women and minority groups are also among stakeholders.
Community Demographics and Support Venues
According to the Department of Veterans Affairs (2021) data, there are more than 19 million veterans in the US. They represent less than 10% of the total adult population, where nine in ten vets are men. Schaeffer (2021) reports that due to overall demographic trends in the US, females’ share is expected to reach 18% by 2049. The population table reveals that approximately 3.5 million out of the total number of veterans had been served in the US Air Forces.
The demographic profile of veterans is expected to become more ethnically and racially diverse: more Hispanic and Black veterans. Currently, non-Hispanic White account for 74% of total vets, the share of former military members who are Black is 13%, while those of Hispanic origin represent 8% (Schaeffer, 2021). According to the US Department of Labor (2021), 5.3% of veterans were unemployed in April 2021, 0.7% lower than non-veterans in the same month. Shane (2020) reported 12% of veteran unemployment in April 2020, caused mainly by the COVID-19 pandemic. The majority of them filled for jobless benefits, while younger ones faced even more challenges in seeking jobs.
The main problem is that the veteran community highly depends on their local communities and concentrated in specific industries and types of jobs. Employed vets who reported a service-connected disability and worked in the public sector reached 31%. Desilver (2019) highlights that retired professionals are significantly more likely to work in installation, repair, maintenance, transportation, and manufacturing occupations than non-veterans. What is more, 10% of veterans work for the federal government compared to only 2% of non-veterans (Desilver, 2019). Contrary, they are notably less represented in education, health, administrative support, office, and professional occupations. It means that 24% of AAR’s workforce is highly dependent on the company and its success. Active military (around 1.3 million) is also a part of the community related to the corporation.
AAR Aviation may put more effort into supporting major veteran groups by lobbying against the privatization of VA health care and support an increase in its budget. Korb (2019) identified that the federal health care system is cheaper and more effective in health care and suicide prevention than private facilities. The company should continue to give veterans more preferences in hiring, especially to women who are still less equally represented in the US workforce. It would be in line with the diversification and inclusion value AAR pursue. It may expand its charitable contributions to the influential groups devoted to supporting veterans and their families. Career pathway programs may involve more students to increase interest among youth to contribute to the aviation industry. The groups that fight against diseases, primarily those often faced by veterans, should also be financially supported.
SWOT Analysis on CSR
Strengths
In terms of CSR, AAR has already received some advantages helping them to survive in the competitive environment:
- CSR and related business ethics are embedded into the company driving ongoing and gradual improvement of performance.
- AAR Corp contributes to the welfare and wellbeing of its main internal and external stakeholders.
- Empowering and supporting the active and retired military in collaboration with local organizations.
- Successful maintenance of trustful and reliable brand image among stakeholders and community (higher loyalty and customer satisfaction).
- Paying specific attention to STEM education, partnering with colleges and organizations, providing MRO site to establish a pipeline of talent, and supports youth.
Weaknesses
- The company’s CSR rating is above the industry average but still significantly lags behind the Aerospace & Defense leaders (AAR Corp. 44 vs. Lockheed Martin Corp. 63).
- Current CSR Plan and initiatives lack the environment-related focus other competitors have, limiting the scope of the company’s community support.
- Lack of communication between AAR’s departments doing CSR activities and the general public causing limited interest in volunteering or participation.
- Modest commitment to social support in the fight against COVID-19 in comparison to market leaders.
Opportunities
- Powerful brand image, loyal commercial and government customers.
- Provide education and job opportunities to talented and disadvantaged youth.
- Establish and follow Sustainability Management Plan to ensure responsible growth, integrity, strong community, and environment protection.
- Focus more on activities of energy use, expanding the scope of the current CSR Plan.
- Assist governmental and local institutions, organizations that respond to the pandemic.
Threats
- Additional investments in CSR during a pandemic are expensive.
- Lack of proper connections between AAR and general public/local communities.
- The inability to provide philanthropic actions to assist the best neighbors amidst the COVID-19 attacks deteriorates community trust (Mahmud et al., 2021, p. 7).
- High competition in the Aerospace & Defence industry.
Conclusions
Generally, current CSR initiatives of AAR support the active and retired military, talented youth and students, care for their employees, and donate workforce and money to health and wellness organizations. Corporate social responsibility is embedded into the company that successfully achieves goals regarding social responsibility. Nevertheless, the scope of initiatives and activities seems to be inferior compared to the industry leaders. For instance, Lockheed Martin Corp has a more diverse Board and actively supports sustainable forestry (CSRHub, 2021). Higher investment into sustainability, environment protection, and the fight against the pandemic were identified as primary opportunities.
Plan Development
Objectives, Business Value, and Risks
The CSR proposal aims to expand AAR’s involvement by enhancing environment protection, comprehensive response to COVID-19, and generally pursue sustainability. Although it requires extra costs, the company needs to catch up with the industry leaders in addressing global issues such as ongoing degradation and pollution of the environment. The main objectives are: reduce energy use and carbon emission and support environmental NGOs. Proposed adjustments should enhance the AAR’s brand image as an internationally responsible corporation, not over-focused on industry-related issues. Thus, the new initiatives’ business value comprises reduced operation costs and emissions in the long run and increased loyalty among the general public.
There should not be any challenging compliance issue since the company is expected to continue employee training, volunteer support, and donation in the way it did before. Among risks, the company should revise and manage the availability of resources, the length of the supply chain, and production methods to further improve sustainability. The firm must follow the changes to specific regulations and guidelines, keeping the image of a reliable and responsible industry player.
Implementation
Following evaluation of main industry trends, AAR has to engage with external and internal stakeholders to identify sustainability core issues. Then, the company should set related sustainability goals to track its further performance and include them in the revised Sustainability Management Plan. Every sustainability plan will be created for five years of operation; however, the corporation is expected to communicate plan achievements to main stakeholders once a year. In order to motivate the latter, AAR may hold regular meetings where ideas would be shared, report to the general public with the help of social media, and provide advanced energy-saving solutions to the customers. Moreover, the firm should reveal its commitment via the official statement and reveal an annual report with achievements to the public. Taking into consideration the trust AAR currently possess, main stakeholders are expected to support its environmental initiatives.
Regarding the external response to COVID-19, the firm should allocate additional funds to contribute to organizations and hospitals that currently need equipment to fight the pandemic. Internally AAR has already set separate operational shifts, organized remote work, and provided staff with needed protection and safety measures. It is great to focus CSR activities on target groups; however, at the moment, the company faces momentum when wider local communities also need help. Today every company has a more extensive community to serve because the pandemic threatens the health of everyone.
Recommendations
New Sustainability Management Plan should include such resource efficiency goals: reduce energy use by 20% and water use by 25%; increase renewable energy consumption; and ensure that facilities meet the requirements of green building certification. The local US communities face complex waste issues exacerbated by the recent Chinese decision to ban waste importing (Katz, 2019). As a result, more trash in the United States, especially plastic, currently stays in the country, not recycled. It ultimately stored in landfills, destroyed in incinerators, or just litters the environment. As a prominent manufacturer and service provider, AAR may start a social campaign to increase awareness among customers and the public regarding the problem and possible ways to tackle it. This environmental initiative can be done in collaboration with local organizations such as Interior Alaska Green Star and Illinois Recycling Association. Investment into such organizations and jointly organized events like cleanups of rivers will promote recycling technology at domestic and state levels. This initiative is able to compensate for the lack of current external involvement in environmental protection.
Another primary recommendation is to partner with an organization like Feeding America, Doctors Without Borders, or Oxfam America. They all deliver food banks, clean water, sanitary supplies, medical equipment, and many other items needed to fight the pandemic. It is excellent that AAR currently supports financially and provides volunteers to organizations that deal with cancer and brain disorders (AAR, n. d.). However, today’s pandemic also requires the attention and financial assistance of the company to protect its stakeholders. AAR may purchase and donate special medical equipment and gadgets to facilities in need all over the countries it operates. These simple steps are not difficult to implement and expected to yield substantive customer loyalty.
Budget Requirements and Benchmarks
Additional volunteering is expected to be free since the internal system of motivation and sound corporate culture encourage staff to contribute. Crucial supplies to hospitals of gloves, face masks, room caps, or air concentrators by the company’s volunteers would cost about $185 000 annually. Social media campaigns and investment into recycling sites would require at least $500,000 in one year. The new sustainability plan does not require high additional costs because AAR always tried to keep its facilities green and up to date. Nevertheless, in order to make some changes and reduce carbon emission additional $400,000 would be needed. In total, proposed changes to the CSR plan require an additional $400,000 of one-time cost and approximately $700,000 of fixed costs.
As mentioned earlier, the proposal suggests setting short-term objectives that should be met once a year. Every department dealing with different CSR issues should report on how and for what they spent budget. For instance, management will receive a task to increase volunteering by 15% next year and achieve a 100% completion rate of training on waste recycling. The already mentioned initiatives should improve AAR’s CSR rating compared to leading competitors.
Conclusion
To conclude, CSR became an essential management and marketing tool for every significant company. It is evident that customers tend to choose brands that contribute to their community and are associated with a good cause. Despite additional costs, CSR initiative usually leads to significantly higher customer loyalty and a stronger brand image. A customer even may consider paying more for the products from the socially responsible company to support it. Thus, CSR is usually a win-win situation for the company, its stakeholders, and the community.
AAR has a prominent policy named “Do It Right” that involves a set of crucial values. Research revealed that its corporate culture is robust and sound, contributing to excellent goal alignment between management and staff. Such culture works as a foundation for comprehensive and practical CSR activities. The current CSR Plan is focused on four aspects: supporting active/former militaries and their families, enhancing STEM education, wellness and health, and fostering diversity and inclusion. The company is known for hiring veterans and providing workplaces to women. The SWOT analysis identified that AAR has a strong brand image, while CSR is embedded into its culture.
Modest commitment to the fight against the pandemic and environmental issues made the company lag behind the industry leaders. To improve the current CSR Plan, two main directions have been proposed, and recommendations are given. AAR should address the waste issue in the US within its sustainability efforts and provide supply assistance to local communities and medical sites. Proposed initiatives would not cost too much and are expected to yield high loyalty and increase future sales.
References
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